Company plans to add lines in existing plants to handle pretzel growth.

BakingBusiness.com,
4/30/2014

by Eric Schroeder

PENNSAUKEN, N.J. — Demand for pretzel products are helping drive growth at J&J Snack Foods Corp. Net income at J&J Snack Foods in the second quarter ended March 29 was $13,521,000, equal to 72c per share on the common stock, up 7% from $12,660,000, or 67c per share, in the same period a year ago. Net sales increased 2% to $205,321,000 from $201,326,000.

For the six months ended March 29, net income was $25,947,000, or $1.39 per share, up 13% from $22,886,000, or $1.22 per share, in the same period a year ago. Net sales for the six months increased 4% to $408,844,000 from $392,734,000.

“Even though our sales and earnings were up for the quarter, we were impacted by the severe weather during the period,” said Gerald B. Shreiber, president and chief executive officer. “It appears that the ‘thaw into spring’ has helped spring our sales back to higher levels as sales for our first three weeks of April were up 8% over our sales for the first three weeks of last year’s April.”

Sales to food service customers increased $2,936,000, or 2%, in the second quarter to $138,329,000, and increased $11,529,000, or 4%, for the six months. Soft pretzel sales to the food service market increased 10% to $38,815,000 in the second quarter and increased 15% to $78,123,000 in the six months due to increased sales to restaurant chains, warehouse club stores, school food service and throughout the customer base, the company said.

“Increased sales to one customer accounted for approximately 1/2 of the increase in pretzel sales in the quarter and 40% in the six months,” J&J Snack said. “Without New York Pretzel, pretzel sales increased about 7% for the second quarter and 13% for the six months.”

In an April 29 conference call with analysts, Mr. Shreiber elaborated on J&J Snack’s pretzel business.

“Our pretzel category is experiencing significant growth and we’re going to be adding lines in existing plants so that we’re able to handle this growth sufficiently,” he said. “The worst thing we could do is to do all this selling and not be able to produce the product or distribute it.”

He said the company is adding capacity not only for its core legacy pretzels, but also for new products, such as rolls, sticks and pretzel buns.

Frozen juices and ices sales increased 17% to $11,857,000 in the three months and 14% to $20,086,000 in the six months, resulting from sales increases primarily to warehouse club stores. Churro sales to food service customers decreased 5% to $13,430,000 in the second quarter and were down 2% to $27,381,000 for the six months.

Sales of bakery products decreased $915,000, or 1%, in the second quarter to $66,169,000, and were essentially unchanged at $135,245,000 for the six months as sales increases and decreases were spread throughout J&J Snack’s customer base.

Commenting on the acquisition environment, Mr. Shreiber said J&J Snack would like to grow “nice and balanced,” with both acquisition of new products and development of new products through its own R.&D. and marketing.

“I feel real good about our abilities, and I feel good about our abilities to develop new products, but at the same time, I am pressing hard to look for acquisitions — not just anything,” he said. “Not just something that’s going to be transformational, but things that we can fit, that we can apply our resources and talents to, to growing it.”

He acknowledged that the company has cash on the balance sheet and “the best use for the cash is in expanding our business and acquisitions.”

“We’ve been paying dividends for seven years and increasing it every year,” Mr. Shreiber said. “Last year we doubled it and we generally buy enough stock back every year to cover our options. So we’re not going to let the cash burn a hole in our pocket, but meanwhile we’re going to be frugal and looking at these opportunities. We have been frugal in the past. We will continue to use our good sense and our good business sense in applying these measures.

“We made a couple of small acquisitions in the past two years and most of them were to kind of pave the road for our pretzel product line. As of this date right now, we have some 500 to 600 carts on the streets of New York, which we didn’t have a couple of years ago and they sell pretzels and other items, and we’re looking to put another item on there. And even though that is an existing and minor operation, we think that it could provide good possibilities.”